Is Another Oil Boom Coming ?

The price of petroleum has in the last five years been higher than it has been higher than the average in the earlier years. As usual, this gave the ammunition to people who maintain the idea that the world is consuming too much of the world's resources another opportunity to argue that the world had reached the Peak Oil. This is the imagined state where the demand for oil overtakes supply capability, with the result that oil prices rise to unprecedented levels. On its face, this theory appears as a sensible position simply because every natural resource that is not renewable is liable to depletion at some time.  Thus the dependence of the world on petroleum energy would be in peril if demand was to permanently outstrip supply.

And yet those who make this argument most forcefully fail to account for a couple of factors specific to the petroleum market and to other markets generally. Writing in the Guardian here, George Monbiot has come to the conclusion that most of the predictions on peak oil status have been proved wrong thus far. The more profound point that he makes is that the rise in the prices of crude petroleum led to the increased exploration and drilling and opened up new fields for exploitation. At the same time, rising prices provided ample incentives for the major crude oil producers to expand production and thereby ensure that supplies come to market.

Unlike the author, I am less saddened by the fact that supplies are available principally because the ability to utilize these resources for growth ensure that countries will be able to achieve income levels that demand cleaner energy and more efficient use of petroleum. Monbiot should perhaps recall that prices do not only work to regulate the supply of crude petroleum but that the same mechanism may be used for environmental protection. My hunch though is that the promoters of the peak oil theory will suspend it for another decade and dust it up again when prices go up momentarily.